Tadawul, Qatar, Oman markets seen as more resilient: Analysts

Saudi Arabia’s stock market ended 1.0 percent higher yesterday, after the main index plunged 4.2 percent on Saturday, its largest daily drop in 10 months.
Traders warned the Tadawul index could easily slump further if oil prices continued to slide when global markets reopened today.
“A rebound in share prices on Sunday was not a surprise after their abrupt fall on Saturday,” Paul Gamble, chief economist and head of research, Jadwa Investment, told Arab News.
“News over the weekend was not good, but it did not justify the size of the fall that occurred on Saturday,” he added.
“The Kingdom is clearly exposed to what is happening in the rest of the world, but is still in a comfortable position,” said Gamble.
“Oil prices are still well above the $70-level we think necessary to balance the budget. Indeed, they are closer to the preferred target than at any time over the past year. Given their exposure to the global economy, there is some justification in the fall in petrochemical stocks, but declines elsewhere are less warranted,” he said.
Brent crude oil fell 7.7 percent in three trading sessions last week to end Friday at $98.43 a barrel, its lowest close since January 2011.
“Oil’s move made investors worry,” Hesham Tuffaha, Bakheet Investment Group’s head of asset management, was quoted as saying in a Reuters report.
“Some people say stocks are oversold, but we might see more declines if Brent fails to rebound to above $100,” he added.
Saudi Arabia will likely maintain a budget surplus if Brent holds above $80, Tuffaha said, but he added: “The correlation between oil and Saudi equities is justified.”
Jarmo T. Kotilaine, chief economist at the National Commercial Bank, commented: “What we are seeing in the markets is an ongoing tug-of-war between the attractive regional fundamentals and the mounting global uncertainties and risks.”
Kotilaine added: In general, the global situation is weakening with major risks of discontinuity in the euro zone but also generally lackluster data from the US and the leading emerging markets. For instance, the Indian slowdown is a significant concern. But as discouraging as some of these developments are, their impact on the markets is discontinuous. New downbeat data or market disruptions tend to depress mood the world over. Days of relative continuity shift the emphasis back on the domestic scene which is much more favorable and thus tends to translate into something of a rebound. The effects of the global uncertainty tend to be amplified by oil demand erosion concerns. Bad days, by depressing oil prices, mean clouds — however relatively speaking – over the fiscal outlook and the competitiveness of the petrochemicals sector. Stronger data tends to have the opposite effect. In general, volatility follows uncertainty. As elevated as the potential risks are, their timing remains uncertain.”
In the longer term, analysts cited by Reuters said the strength of domestic economies in Saudi Arabia, Qatar and Oman may stabilize those stock markets if oil prices bottom out. But now that investors have become bearish, markets in the UAE and Kuwait are seen as vulnerable to more losses.
Dubai’s index sank 2.0 percent on Sunday to 1,442 points, its lowest close since Feb. 2, and it may test January’s seven-year low of 1,301 points.
The benchmark hit a 16-month high on March 5, but some analysts think this surge was largely speculative rather than based on companies’ performance, and the market has since plunged 19 percent. It now stands only 7 percent higher than its level at the end of last year, and is down 77 percent from its 2008 peak.
“UAE markets are illiquid and tend to be volatile — even one seller can drive the market down,” said Shahid Hameed, Global Investment House’s head of asset management for the Gulf region.
“Fundamentals have improved a little bit, but the early-year rally was too strong and driven by better-than-expected dividend announcements — a turnaround in the UAE hasn’t really happened.
“Dubai has now given back most of its 2012 gains and will probably re-test the 1,300 level again. Fundamentals in the UAE are not as strong as they are in Saudi Arabia or Qatar...(which) should find a floor near current levels.”
Dubai’s Emaar Properties lost 4.1 percent, Air Arabia dropped 2.8 percent and construction firm Drake & Scull fell 3.8 percent.
Abu Dhabi’s index slipped 0.6 percent, its seventh straight decline.
In Kuwait, the main index suffered its largest drop since last August, losing 1.2 percent.
Telecommunications operator Zain fell 1.4 percent and Islamic lender Kuwait Finance House dropped 1.3 percent, with both blue chips now trading around 2009 levels.
“In Kuwait, not much is happening economically and that is weighing on the market,” said Global’s Hameed.
Oman also slid, by 0.6 percent, as Bank Muscat fell 2.7 percent to its lowest level in more than two years. Shares in Oman’s largest bank are among the most widely held by foreign investors, and so are very sensitive to global market moves.
“We will move in tandem with regional and global markets,” said Joice Mathew, United Securities’ head of research. “Oman is one of the highest dividend-yield markets in the Gulf, which should support local sentiment in terms of valuations.”
Yields on US and European debt fell to record lows on Friday and Western stock markets plunged after a weak US jobs report aggravated fears of a global slump.